American International, which has benefited from increases in insurance premiums in the last 18 months, is also having to pay out more for its own insurance coverage.

The Financial Times reported on Monday that the world's largest insurer, which has significant operations in Bermuda, reported an almost 60 percent rise in the cost of the premium it pays to protect its own board and executive officers.

Directors' and officers' insurance, known as D&O, has become far more expensive following the wave of corporate scandal, the huge increase in shareholder litigation against companies and the rising cost of individual payouts.

AIG has been able to push through steep increases in the prices it charges for D&O but it is feeling the effects of the hardening market itself the Financial Times said. It said in a filing with US regulators that its premium cost $2.85 million for the year to the end of next month, up 58 percent from last year's $1.8 million. AIG did not say where it purchased the insurance.

AIG warned over a year ago, before the extent of the corporate scandals became clear, that the insurance industry was facing a bad run of D&O claims. Then this February the company shocked investors with a $2.8 billion pre-tax charge, mostly to boost reserves for casualty claims and to account for directors' payouts.

Meanwhile, AIG also reported that long-time chairman Maurice (Hank) Greenberg went without his bonus in 2001 after the September 11 terrorist attacks harmed performance. But the bonus was reinstated in 2002.

He was paid $1 million in salary, a $5 million bonus, was awarded 375,000 stock options and $86,000 from a separate savings plan.

There was also an $11m pay-out from a long-term incentive plan set up in Bermuda in 1975.

The FT said AIG does not pay for that plan - it has been covered already by AIG shares held in a private holding company in Bermuda. The shares were put there to provide lucrative rewards for long-term service to the company. Executives become eligible for the payments as they rise through the company but they typically collect only on retirement.